Listen to this article
Transocean, the owner of the drilling rig at the centre of the BP oil spill in the Gulf of Mexico, fell steeply into the red last year and announced a $1bn charge for the accident, in what analysts said was the first indication the company was preparing to settle.
The world’s largest driller of deepwater wells attributed the annual net loss of $5.63bn to a $5.2bn non-cash charge resulting from a goodwill impairment associated with its drilling unit and an estimated $1bn loss from the spill, both of which were booked in the fourth quarter of 2011.
Transocean said the estimated $1bn charge for the spill was a reasonable assessment “at this time”, but cautioned that the figure could be adjusted as new information came to light.
The company is locked in a bitter battle with BP and others over liability for the disaster in April 2010, which killed 11 workers and spilt more than 4m barrels of oil into gulf waters from the ruptured Macondo well.
The civil trial over the disaster, in which Transocean is a co-defendant with BP, had been due to start on Monday in New Orleans but was postponed for one week to allow the parties more time to try to reach a settlement.
Analysts at Tudor Pickering Holt said Transocean’s “Macondo reserve” pointed to “possible settlement”.
Transocean has consistently said that the terms of its contract with BP protected it from all the costs arising from the disaster.
Earlier this month, Judge Carl Barbier, who will preside over the civil trial in New Orleans, ruled that Transocean may be liable for removal costs under the Oil Pollution Act but not the subsurface discharge of oil. He also said the company may qualify under the Clean Water Act as an “operator” of an offshore facility but that there were “disputed facts” as to whether it did.
On Monday, Transocean said the $5.2bn goodwill impairment charge was primarily associated with a decline in the market valuation of its contract drilling services business. The loss booked for the year compares with net income of $961m reported in 2010.
Transocean last week alerted the market that it would not be proposing a dividend at its upcoming annual meeting and that it would be taking a non-cash charge on a “substantial” portion of the goodwill associated with its drilling unit.
It has been a difficult few months for the company. Investors have also been disappointed by Transocean’s decision last November to issue $1.2bn in new shares to pay for the $1.4bn acquisition of Aker Drilling. The share sale, accompanied by a $2.5bn bond issue, was meant to protect the company’s investment-grade rating after Moody’s put it on watch for a possible downgrade.
Stephen Newman, Transocean chief executive, said he was “fully committed” to addressing the issues that negatively impacted the company last year, noting that business had picked up in the fourth quarter.
Transocean said cash flow from operating activities fell to $1.78bn compared with $3.94bn the previous year. Revenues were down to $9.14bn compared with $9.46bn in 2010.
Shares in the company, which has its headquarters in Switzerland, were up 4.93 per cent to SFr48.14.